Italy spooks markets

Italy spooks global financial markets

Falls came after Italy’s central bank chief warned country was only ‘a few short steps away’ from losing investors’ trust.

By ZOYA SHEFTALOVICH

Italy’s political crisis is reverberating through financial markets, with Asia following Europe and the U.S. down.

Japan’s Nikkei, Hong Kong’s Hang Seng and China’s Shanghai Composite were all down in the Asian trading session today. The Nikkei 225 fell 1.5 percent, the Hang Seng was down 1.41 percent and the Shanghai Composite fell 1.77 percent.

The downward trend came after a sell-off in the U.S. and Europe on Tuesday. At the end of the trading day Tuesday, Milan’s FTSE Mib index was down 2.5 percent, and Europe’s eurostoxx index fell 1.5 percent. The spread between Italian and German government bonds reached 300 basis points at one point, then fell to 283 bp, the highest level since 2013. In the U.S., the Dow Jones industrial average sank almost 400 points and the S&P 500 was down almost 1.2 percent, with banks particularly affected.

The falls came after Bank of Italy Governor Ignazio Visco warned on Tuesday that Italy was only “a few short steps away from the very serious risk of losing the irreplaceable asset of trust.”

Italy remains in political deadlock after Carlo Cottarelli, a former IMF official whom President Sergio Mattarella tasked on Monday with attempting to form a government after a populist would-be coalition failed to yield one, asked on Tuesday for more time to finalize a Cabinet.